Many people equate estate planning to the creation of a last will. In fact, estate planning should be viewed as a comprehensive, holistic endeavor. There are various different ways to transfer assets, and your estate plan should also include preparations for the eventualities of aging.
Let’s look at the details.
Wills
With a last will you can state your final wishes with regard to the distribution of your monetary resources. You can also nominate a guardian for minor children in your last will and a person to handle your affairs known as an executor.
If you maintain direct personal possession of your property throughout your life and arrange for its distribution through the terms of a will, probate will be a factor. Probate is the legal process of estate administration. The executor that you name in your will must admit the will to probate before the heirs receive their inheritances.
Probate is not inherently negative, but there are some drawbacks that go along with the process. It is expensive, it can be time-consuming, and it is a public proceeding. Any interested parties can access probate records to find out how you planned your estate.
Revocable Living Trusts
Revocable living trusts are very useful for those who would like to avoid probate. With this type of trust you do not surrender control of the assets while you are living. After you die, the trustee that you name in the trust agreement distributes assets to your chosen beneficiaries. These distributions are not subject to the probate process.
Tax Efficiency
High net worth individuals may be exposed to the federal estate tax. This tax is potentially applicable on asset transfers that exceed the amount of the federal estate tax exclusion. At the present time, the exclusion is $5.34 million.
If your assets exceed this amount, you can implement tax efficiency strategies when you plan your estate.
Asset Protection
Asset protection is something to take into consideration when you are engaged in your estate planning efforts. We live in a litigious society, and you have to be vigilant. There are estate planning techniques that can be implemented if asset protection is a priority for you.
Incapacity Planning
When you are planning your estate, you should consider the period of time that will precede your passing. Many people become incapacitated late in their lives, and you can account for this by executing certain legally binding documents.
Durable powers of attorney can be used to name hand-picked decision-makers to act on your behalf in the event of your incapacitation. For those with more than a very modest estate, a living trust is most often a better device for handling the affairs of someone who is incapacitated. You could also execute an advance health care directive to state your wishes regarding the utilization of life-sustaining measures.
Estate Planning Consultation
In this post we have provided you with a basic overview. If you would like to discuss estate planning with an experienced and qualified estate planning attorney, simply call our office.
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